We would like to inform you that wood chips are generally taxable at the reduced VAT rate of 7% as of 1 January 2023.
Following the ruling of 21 April 2022, in which the Federal Fiscal Court decided that wood fuels are subject to the tax rate reduction, the Federal Ministry of Finance has since clarified and added that this includes any wood waste suitable for combustion, regardless of its form, degree of moisture and actual use (material or thermal).
According to the Value Added Tax Act, supplies of firewood (in the form of logs, billets, twigs, bundles of brushwood or similar forms) and wood waste are subject to the reduced tax rate of currently 7 %. However, wood chips were taxed at the standard tax rate of currently 19 %. In its ruling from the previous year, the Federal Fiscal Court decided that wood chips intended exclusively for combustion are subject to the reduced tax rate of 7%. With the letter of the Federal Ministry of Finance dated 4 April 2023 for the supply of wood chips, a (simplification) regulation on the applicable VAT rate of 7% has now been issued. The actual use, whether for energy or material purposes, or the degree of drying is not decisive. Only if the packaging or the quantity supplied excludes the use for combustion, wood chips are subject to the standard tax rate of 19 % according to the previous ruling.
Therefore, with immediate effect, we can only accept incoming invoices for deliveries of wood chips or shredder material that show the reduced tax rate of 7%. This should be taken into account in the invoicing. For services rendered before 1 January 2023, performing contractors may invoke the application of the standard tax rate (also for the purposes of input tax deduction by the service recipients).
Kevin Sammann, Head of Biomass/Fresh Wood, is pleased with the decision and explains: “After a year of ambiguity, there is finally clarity on this matter, which is very important for us, after all, this affects the entire market in which we operate.”
If you have any questions or uncertainties, we recommend that you consult a tax advisor. We are also at your disposal for further questions.